Former FTX Chief Government Sam Bankman-Fried, who faces fraud fees over the collapse of the bankrupt cryptocurrency change, walks outdoors the Manhattan federal courtroom in New York Metropolis, U.S. March 30, 2023.
Amanda Perobelli | Reuters
FTX founder Sam Bankman-Fried advised jurors in his felony trial on Friday that he did not commit fraud at his crypto change, which collapsed late final 12 months.
Bankman-Fried addressed the New York courtroom a day after U.S. District Decide Lewis Kaplan despatched jurors house early to think about whether or not some facets of the defendant’s deliberate testimony, associated to authorized recommendation he bought whereas operating FTX, could be admissible in courtroom.
On Friday morning, protection legal professional Mark Cohen requested Bankman-Fried if he defrauded anybody.
“No, I didn’t,” Bankman-Fried responded.
Cohen adopted by asking if he took buyer funds, to which Bankman-Fried mentioned “no.”
Bankman-Fried, 31, faces seven felony counts, together with wire fraud, securities fraud and cash laundering, that would land him in jail for all times if he is convicted. Bankman-Fried, the son of two Stanford authorized students, has pleaded not responsible within the case.
Previous to the defendant’s look on the stand, the four-week trial was highlighted by the testimony of a number of members of FTX’s high management workforce in addition to the individuals who ran sister hedge fund Alameda Analysis. All of them singled out Bankman-Fried because the mastermind of a scheme to make use of FTX buyer cash to fund all the pieces from enterprise investments and a high-priced condominium within the Bahamas to protecting Alameda’s crypto losses.
Courtroom sketch displaying Sam Bankman Fried questioned by his legal professional Mark Cohen. Decide Lewis Kaplan on the bench
Artist: Elizabeth Williams
Prosecutors walked former leaders of Bankman-Fried’s companies by particular actions taken by their boss that resulted in shoppers shedding billions of {dollars} final 12 months. A number of of the witnesses, together with Bankman-Fried’s ex-girlfriend Caroline Ellison, who ran Alameda, have pleaded responsible to a number of fees and are cooperating with the federal government.
The choose’s choice to ship the jury house on Thursday allowed Bankman-Fried and his protection workforce to audition their finest authorized materials for Decide Kaplan.
‘Vital oversights’
On Friday, Bankman-Fried acknowledged that considered one of his largest errors was not having a danger administration workforce or chief regulatory officer. That led to “important oversights,” he mentioned.
Cohen walked Bankman-Fried by his background and the way he bought into crypto. The defendant mentioned he studied physics on the Massachusetts Institute of Know-how and graduated in 2014. He then labored as a dealer on the worldwide desk at Jane Avenue for over three years, managing tens of billions of {dollars} a day in buying and selling. That is the place he discovered the basics of issues like arbitrage buying and selling.
Within the fall of 2017, Bankman-Fried based Alameda Analysis.
“This was when crypto was beginning to develop into publicly seen for the primary time,” Bankman-Fried testified.
He mentioned individuals have been enthusiastic about it, watching bitcoin, which had jumped from $1,000 to $10,000 in a two-month interval. Banks and brokers weren’t concerned but and it appeared like there would most likely be large demand for an arbitrage supplier, he mentioned.
“I had completely no thought” how cryptocurrencies labored, Bankman-Fried mentioned. “I simply knew they have been issues you may commerce.”
The primary Alameda workplace was in an Airbnb in Berkeley, California, he mentioned. It was listed as a two bed room however they used the sofa in the lounge as a 3rd mattress and the attic as a fourth.
He began FTX in 2019. Buying and selling quantity grew considerably on FTX from a number of million {dollars} a day to tens of tens of millions of {dollars} that 12 months to tons of of tens of millions of {dollars} in 2020. By 2022, that quantity was as much as $10 billion to $15 billion of {dollars} per day in buying and selling quantity, he mentioned.
Bankman-Fried mentioned Alameda was permitted to borrow from FTX, however his understanding was that the cash was coming from margin trades, collateral from different margin trades or property incomes curiosity on the platform.
At FTX, there have been no basic restrictions on what may very well be carried out with funds that have been borrowed so long as the corporate believed property have been larger than liabilities, Bankman-Fried testified.
In 2020, a routine liquidation gone flawed led to among the particular borrowing permissions at Alameda, he mentioned. The chance engine was sagging underneath the load of development. A liquidation that ought to have been within the 1000’s of {dollars} was within the trillions of {dollars}. Alameda was immediately underwater due to closing the place.
The incident uncovered a bigger concern, that the potential of an faulty liquidation of Alameda may very well be disastrous for customers.
Bankman-Fried mentioned he talked to FTX’s engineering director Nishad Singh and co-founder Gary Wang, each of whom testified earlier on behalf of the prosecution. They prompt creating an alert, which might immediate the consumer to deposit extra collateral, or a delay, Bankman-Fried mentioned. They later carried out a characteristic like that, he mentioned, including that he discovered it was the “permit damaging” characteristic.
Bankman-Fried testified that he wasn’t conscious of the quantity Alameda was borrowing or its theoretical max. So long as the web asset worth was optimistic on the change and the size of borrowing was cheap, growing the road of credit score so Alameda might maintain filling orders was advantageous, he mentioned. Bankman-Fried added that he now believes what Singh and Wang did was enhance the road of credit score.
Robust promote
Convincing the jury can be a tall order for Bankman-Fried after a mountain of damning proof was offered by the federal government.
Prosecutors additionally entered corroborating supplies, together with encrypted Sign messages and different inner paperwork that seem to indicate Bankman-Fried orchestrating the spending of FTX buyer cash.
The protection’s case, which consists of Bankman-Fried’s testimony together with that of two witnesses who took the stand Thursday morning, hinges largely on whether or not the jury believes the defendant did not intend to commit fraud.
On Thursday, underneath questioning led by Cohen, Bankman-Fried appeared to position a lot of the felony blame on FTX’s chief regulatory officer, Dan Friedberg, in addition to outdoors counsel Fenwick & West, which suggested the crypto change. Bankman-Fried spoke about Friedberg’s lively involvement in all the pieces from the companywide auto-deletion coverage on messaging apps like Sign, to the creation of Alameda’s North Dimension checking account, the place billions of {dollars} price of FTX buyer cash was funneled.
The previous FTX chief additionally mentioned that the tons of of tens of millions of {dollars} in private loans to himself and different founders of the platform have been structured by promissory notes drafted by his in-house authorized workforce and mentioned in live performance together with his basic counsel and Friedberg. Having the blessing of his authorized counsel was one thing that SBF mentioned he “took consolation in.”
— CNBC’s Daybreak Giel contributed to this report
WATCH: Sam Bankman-Fried testifying in his felony case
